WEBVTT - Elliott Stein on Deutsche Bank $14 Billion Suit (Audio)

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<v Speaker 1>I'm Charlie. That's the Bloomberg business flash you're listening to.

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<v Speaker 1>Taking stock with Kathleen Hay and Pim Box on Bloomberg Radio.

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<v Speaker 1>The lawsuits they just keep coming. Shares of Deutsche Bank

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<v Speaker 1>today down more than eight percent. The US Justice Department

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<v Speaker 1>and demanding fourteen billion dollars as part of a settlement

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<v Speaker 1>having to do with the residential mortgage backed securities. It's

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<v Speaker 1>just adds to the woes at Deutsche Bank and many

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<v Speaker 1>other banks. The bank has previously been sued by various

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<v Speaker 1>entities for foreign exchange rates, interest rate swaps, liebor ss

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<v Speaker 1>A bonds as well as treasuries. They're being investigated for

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<v Speaker 1>for x for metals trading, as well as sanctioned breaches.

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<v Speaker 1>The list goes on here to tell us what's important

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<v Speaker 1>and what's not. As Elliot Stein, he is senior litigation

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<v Speaker 1>analyst for Bloomberg Intelligence, Elliott Boy, this has got to

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<v Speaker 1>keep the lawyers busy for quite a long time. It

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<v Speaker 1>has been for years, um, and it will continue to

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<v Speaker 1>keep lawyers gainfully employed for a while. UM. You know this, this, uh,

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<v Speaker 1>this settlement, potential settlement, settlement, anticipated settlement. Is not a

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<v Speaker 1>surprise when new Deutsche Bank was going to be one

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<v Speaker 1>of the next big banks to settle with the Department

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<v Speaker 1>of Justice. Um, but I think the number the fourteen

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<v Speaker 1>billion dollar figure. It took a lot of people by surprise. UM.

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<v Speaker 1>Our Bloomberg intelligence estimate UH for a settlement was about

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<v Speaker 1>four billion to eight billion dollars, which leads us to

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<v Speaker 1>believe that, you know, it'll probably wind up being untilds

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<v Speaker 1>the high end of that range. Okay, I just want

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<v Speaker 1>to play a clip from Catherine Nixon, the chief investment

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<v Speaker 1>officer at Northern Trust. She was speaking earlier on Bloomberg

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<v Speaker 1>and then get your reaction, gentlemen, to this. It's it's

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<v Speaker 1>just keeps coming back. It's you know, like Jason from Friday,

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<v Speaker 1>and it's very hard for us to get away from this.

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<v Speaker 1>And you know, when you think about what it what

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<v Speaker 1>it does for the macro outlook in Europe. And you know,

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<v Speaker 1>we've been talking previously about how the European banking system

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<v Speaker 1>was facing an income statement issue, not a balance sheet

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<v Speaker 1>issue with with low and negative interest rates, and now

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<v Speaker 1>it's become a balance sheet issue again. So it's not

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<v Speaker 1>just Georgia Bank. We have UBS, RBS credit Suite who

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<v Speaker 1>are going to soon be dealing with the same thing.

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<v Speaker 1>Um and it just keeps on going. That was Catherine Nixon,

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<v Speaker 1>chief Investment Officer at Northern Trust, speaking earlier on Bloomberg. So,

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<v Speaker 1>Elliott Stein, what do you make of this is it's

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<v Speaker 1>just gonna be just the beginning of what is going

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<v Speaker 1>to be a continuous litigation process. Well, it is for

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<v Speaker 1>a lot of European banks. So you know, as most

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<v Speaker 1>people will recall, Um, the Department of Justice did settle

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<v Speaker 1>some of its larger r MBS probes with US banks

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<v Speaker 1>via a city JP Morgan Goldman, Morgan Stanley. Um, but

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<v Speaker 1>it still is investigating several European banks, just like that

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<v Speaker 1>clip showed. Um. So in addition to Deutsche Bank, you

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<v Speaker 1>have Barkley's credit Suites, HSBC, RBS UBS. They're all being

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<v Speaker 1>investigated by the Department of Justice over r MBS practices

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<v Speaker 1>from almost ten years ago. Um. And so we anticipate

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<v Speaker 1>more settlements with those banks as well. And you know

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<v Speaker 1>this anticipated settlement with Deutsche Bank. Um, is you know

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<v Speaker 1>going to tell us a little bit about where those

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<v Speaker 1>settlements are gonna wind up? Well, I mean, what did

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<v Speaker 1>Bank America got a seventeen billion dollars settlement? Right? So

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<v Speaker 1>is Deutsche Bank almost as guilty of this is Bank America.

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<v Speaker 1>They do just as much wrong in the same scale

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<v Speaker 1>as Bank America. Right, So you know, first of all,

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<v Speaker 1>these are civil fine, so guilty and innocence doesn't you know,

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<v Speaker 1>guilt and innocence doesn't come into it then not know,

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<v Speaker 1>I know what you mean. It is civil fraud. The

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<v Speaker 1>charges are civil frauds so um or the allegations are

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<v Speaker 1>potentially gonna be civil fraud charges. Um. Look, I think

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<v Speaker 1>the number is gonna be lower than fourteen billion dollars.

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<v Speaker 1>I think it's gonna wind up being a little north

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<v Speaker 1>of eight billion dollars UM, which is a little higher

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<v Speaker 1>than the range we had. Uh. You know, it just means,

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<v Speaker 1>you know, the Department of Justice has taken several factors

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<v Speaker 1>into account, the amount of evidence of fraud in documents

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<v Speaker 1>and and um and that they get from other testimony.

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<v Speaker 1>But then also the amount of securities that were sold

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<v Speaker 1>during the relevant time period, the amount of losses that

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<v Speaker 1>investors have incurred, and games that the bank's got um

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<v Speaker 1>and you know, be of a because the countrywide was

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<v Speaker 1>a much bigger player in the R and B S

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<v Speaker 1>markets during the relevant time That's why it's fine was

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<v Speaker 1>so large. That's my point. But this fine is almost

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<v Speaker 1>as much as that. So what did d O J expect. No,

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<v Speaker 1>it's gonna be it's gonna end up being lower than

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<v Speaker 1>seventeen billion dollars. Um, you know JP JP Morgan paid

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<v Speaker 1>thirteen billion dollars. I think it'll probably be a little

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<v Speaker 1>south of that. Is there any possibility that this will

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<v Speaker 1>sink Deutsche Bank? Uh? Well, like they have six billions

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<v Speaker 1>stock is you know, the stockholders can't be happy about this, look,

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<v Speaker 1>and I think that's um. You know, the Department of

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<v Speaker 1>Justice is not in the business of putting banks out

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<v Speaker 1>of business. Um, So you know, if it comes to that,

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<v Speaker 1>I think that's a selling point that Deutsche Bank has

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<v Speaker 1>in its pocket. They're gonna need some help from the

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<v Speaker 1>German government. I can't comment on you smiling about that one.

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<v Speaker 1>So I imagine there must be conversations. I mean, is

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<v Speaker 1>that typical? Would there be government conversations? But Frow Miracle

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<v Speaker 1>was asked about this in Bratislava today. She declined to

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<v Speaker 1>common as well. But she certainly can't be happy now

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<v Speaker 1>with the US government just piling fines onto all of

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<v Speaker 1>these big German benchmark companies. I mean, um, you know, Bosh,

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<v Speaker 1>I understand it is also being investigated, but that's a

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<v Speaker 1>company exactly, and Volkswagen had fifteen more than sixteen billion

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<v Speaker 1>dollars in fines, and now Deutsche Bank, I mean, the

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<v Speaker 1>US Justice Department is just attacking German national companies. Well, look,

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<v Speaker 1>it's not just the German companies. I mean, they're investigating

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<v Speaker 1>you know, hey, they've find several US banks and now

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<v Speaker 1>they've moved on to the European banks who were all

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<v Speaker 1>involved in in selling rnbs during the relevant time. Um

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<v Speaker 1>So I don't think they're you know, picking out any

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<v Speaker 1>particular bank, any particular country. This was an industry wide phenomenon,

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<v Speaker 1>and they're going after the players that they thought acted wrongfully.

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<v Speaker 1>I wonder if it begs the question did any of

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<v Speaker 1>the banks do things that were legal? Now otherways, I

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<v Speaker 1>understand all the ones that they have now being sued,

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<v Speaker 1>but did anyone not do something that was well, you know,

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<v Speaker 1>the government doesn't stand up and write a thank you

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<v Speaker 1>writer when clearly thank you very much for spending time

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<v Speaker 1>with us. That Elliot Stein is our senior litigation analysts

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<v Speaker 1>for Bloomberg Intelligence. Speaking about Deutsche Bank and the US

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<v Speaker 1>Justice Department seeking fourteen billion dollars worth of fines, you're

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<v Speaker 1>listening to taking stock I'm pim Fox. My co host

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<v Speaker 1>today is Matt Miller. This is Bloomberg. Coming up on

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<v Speaker 1>taking Stock, will be speaking with Mark Vitner. He is

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<v Speaker 1>senior economist at Wells Fargo Securities. Will give us his

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<v Speaker 1>take on consumer prices, the Federal Reserve, and the health

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<v Speaker 1>of the U. S. Economy.